Spain confirms 4.9% September inflation as core rise pressures ECB

• Spain September final CPI +4.9% vs +4.9% y/y prelim
• Prior +4.3%
• Spain September final HICP +5.0% vs +5.0% y/y prelim
• Prior +4.6%
• Spain September core CPI +3.1% y/y
• Prior +2.9%

September's final report confirms another uncomfortable rise in Spanish inflation, with the headline annual rate climbing to 4.9% from August's 4.3%. The harmonised reading also moved higher, hitting the 5% mark for the first time since February 2023.

The jump is mainly due to the surge in energy prices, largely driven by the Middle East conflict. However, the core price figures make the latest Spanish data more concerning.

Core annual inflation rose to 3.1% in September from 2.9% previously, marking its highest level since March 2024.

The ECB can look past temporary energy shocks, but the worry is when those higher costs start feeding into other goods and services. With core prices now moving up, there are growing risks that the initial price shock is broadening into wider inflation pressures, making the eventual return to its 2% target much harder.

This is just one report and won't alone force the ECB into another rate hike. Yet with the ECB having already raised rates twice this summer, the latest data strengthens the argument for staying cautious.

But if core prices keep creeping higher across Europe, the debate will soon shift from whether another rate hike is warranted to how much longer the ECB can hold off.